Regulatory Year In Review

Policy
I apply economic insights to improve regulations and their effects.

The Trump administration pressed ahead with its deregulatory agenda in 2018. The pace of new regulation remains well below the norm in prior years. In addition, agencies are beginning to chip away at the stock of regulations on the books, issuing proposed and final regulations that modify rules put in place by the previous administration. Meanwhile, interim actions to delay or postpone existing regulations did not fare well in the courts. Also noteworthy was a revised agreement that may bring greater analysis and transparency to Internal Revenue Service (IRS) regulations. Let’s look at each of these in turn.

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Slower pace of regulatory activity

Available measures indicate that agencies are issuing new regulations at a significantly slower pace than in previous years. With two weeks remaining in 2018, the Federal Register—the daily publication of proposed and final regulations and notices—has printed fewer than 64,000 pages, compared to an average of more than 76,000 pages per year since 1993. The 2018 volume will weigh in 20% lighter than during the Obama administration (when the average page count was 80,000 per year) but a bit heavier (5% more pages) than in 2017.

As of December 12, 2018, the Government Accountability Office (GAO) reports that agencies published 1,823 regulations since January 1, 2018. Of those, agencies identify 471 as significant or substantive, and 40 as “major”—expected to have impacts of $100 million or more per year. By comparison, during the second year of President Obama’s first term, GAO’s database tracked 3,122 published regulations, of which 956 were significant and 97 were major. By this measure, the pace of regulations in 2018 appears to be about half that of 2010.

Another metric comes from the Office of Information and Regulatory Affairs (OIRA), which reviews all significant regulations from executive branch agencies. As of December 12, 2018, it has completed review of 123 significant final rules, of which 33 were economically significant (meeting the $100 million per year threshold, similar to major). That is less than half the number of final regulations OIRA reviewed during the second year of the Obama administration, which totaled 299 significant and 70 economically significant rules.

Further, according to OIRA reports, most of this year’s regulatory actions are “deregulatory” in nature. During fiscal year 2018 (which ended in September), agencies reported 57 significant deregulatory actions and 14 regulatory actions. This 4-to-1 ratio well exceeds the 2-to-1 benchmark set forth in Executive Order 13771.

High profile regulatory actions

These deregulatory actions include some high-profile rules. For example, the Department of Labor (DOL) issued a rule in June 2018 allowing small employers and self-employed individuals to group together to form Association Health Plans. The rule allows them to avoid the more stringent requirements (and associated higher insurance premiums) the Affordable Care Act imposed on “individual” and “small group” health insurance markets.

In January 2018, the Federal Communications Commission (FCC) released its Restoring Internet Freedom order repealing and replacing its 2015 net neutrality rules that had made broadband internet services subject to public utility regulation and prohibited certain conduct. The Senate passed a resolution to disapprove the order under the Congressional Review Act, but without a corresponding resolution in the House, the bill was never presented to the President. Twenty-two states and the District of Columbia along with some businesses, other state and local entities and advocacy groups, have sued the FCC over the order. Initial hearings are scheduled for February 2019.

Modifying or removing regulations that are already on the books requires agencies to develop a record justifying any changes and to seek public comment on those changes before issuing final rules. In 2018, executive branch agencies proposed 47 economically significant regulations, many of which set in motion actions to modify or eliminate existing rules. For example, the Department of Interior proposed to revise offshore oil and gas drilling regulations that took effect in 2016 and the Environmental Protection Agency (EPA) and Department of Transportation proposed to retain model year 2020 fuel economy standards through 2026, pulling back a midnight EPA action that would have increased their stringency in later years. EPA also proposed major revisions to the Obama administration’s Clean Power Plan and the much-litigated Waters of the United States rule.

Setbacks in the Courts

Motivating the administration to build careful records supporting these high-profile regulatory actions is the prospect of litigation. In 2018, the courts continued to side with plaintiffs who challenged Trump administration efforts to delay or suspend regulations without following Administrative Procedure Act notice-and-comment provisions. According to the Institute for Policy Integrity, of 14 deregulatory actions initiated in 2018, all but two were vacated or enjoined by courts or withdrawn by the agency.

Treasury MOA

In April 2018, the Treasury Department and OIRA signed a memorandum of agreement (MOA) reversing a long-standing agreement that exempted certain tax rules from OIRA review. Under the MOA, IRS must now submit its rules for review the way other executive agencies do, but OIRA commits to a shorter review period for most significant rules (45 days instead of 90) and for certain urgent regulatory actions (ten days, on request). The MOA also commits Treasury to conduct regulatory impact analysis as required by Executive Order 12866 for its economically significant rules. While the MOA became effective immediately, it gave Treasury a year to obtain the resources needed to conduct such analysis.

To date, OIRA has reviewed 15 IRS rules, of which 12 were proposals. Five of the proposed rules were classified as economically significant. As of December 12, 2018, another three proposed IRS rules are under review.

Looking Ahead

With OIRA Administrator Neomi Rao’s recent nomination to the DC Circuit Court, we shouldn’t expect bold new policy pronouncements in the next few weeks. However, 2019 may yield a much-anticipated executive order bringing independent regulatory agencies under OIRA review, as well as statements on how guidance documents should be reported under the Congressional Review Act.